What to do when you are turned down for a loan
Often, when your lender scrutinizes your loan application for a new home or piece of property so finely that it is finally turned down, it can be very distressing. If this happens, you should be able to understand just why such a decision was taken and do what you can to remedy the situation. The cause for rejection given below will help you understand just why it happens on some transactions.
Some causes for rejection:
The appraised value is far too low: Your lender perhaps found the ratio of the loan amount to the sale price or the appraised value of the property to be substantially lower than the purchase price or loan-to-value (LTV) ratio. Or perhaps the LTV is higher than your lender is allowed to approve. Then, perhaps you have applied for 90-95% of the purchase price as the loan amount. A low appraisal will then make your loan request far too large.
Insufficient funds: When your lender goes through your financial information and you're verification of deposit, he/she will find that you do not have enough funds to make the necessary down payment and cover closing costs. Even if these funds do not come from a loan, a gift could go a long way. Alternatively, you could ask the seller to pay the closing costs.
Do you have insufficient income?Not only do you make enough to support this mortgage, but other debt as well. Are you paid as a self employed borrower? Do you "write off" expenses on your taxes? have you moved around from job to job? Recently changed job descriptions? Many things can contribute to insufficient income.
Up to your eyes in debt: Often, lenders don't reject applications solely because of the amount of debt they carry. It is also the many credit cards they possess and revolving credit accounts with proof of rising account balances that come close to the limit prescribed. Such information is detrimental if you are out to prove your creditworthiness. To remedy the situation, you will need to pay off as many of your debts as possible and then reapply for a loan.
Poor credit history: What can be more devastating than to have your loan request turned down due to a history of poor debt repayment habits? If your lender sees that you have a history of making late charges often, owing amounts to the bank or insolvency, an approval may be tough to achieve. Older Bankruptcy's are not deal killers, it's what you've done with your credit since that transgression. If you've had a BK..Do not be late. You must show you've learned from your previous mistakes.
Rejection is not the end of the world: Just because a lender rejects your loan application doesn't mean you can never own property. You can take corrective steps to improve your chances of acceptance. But if you work steadfastly at it, you can work through your problems. I work with a credit repair team that can assist you in the right direction. I welcome the opportunity to help you, whether your credit history is perfect..or in need of assistance.
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